Professional Ethics
Aims
Review threats to a professional accountant
Discuss the AAT guidelines on threats to the
fundamental principles and to a professional accountant
Discuss conflicts that may arise for a accounting
professional
Learning Outcomes
By the end of the session learners will be able to
1. Explain the conceptual framework approach
2. Explain what an inducement is and identify at least 2
examples of an inducement
3. List the 4 key Bribery Act offences
4. Explain the different types of conflicts that may arise
What are the threats to the
Professional Accountant??
Conceptual Framework
Code of ethics says that accountants should take the
conceptual framework approach to ethics.
This requires an accountant to identify, evaluate and
address threats to his/her compliance with the
fundamental principles rather than applying a set of
rules exactly.
Conceptual framework vs rule-based
approach
What does this mean?
Principle-based (integrity) approach
You look at the objective to be achieved and focus on it. The AAT states the
fundamental principles that must be observed.
They are the profession’s firm guideposts.
Rule-based (compliance) approach
You apply the rules exactly as stated, regardless of the circumstances. The law
defines the minimum ethical standards in a given area of practice and
government regulations outline what is acceptable and what is not.
Example
Your firm has recently taken on James
Roberts, who is a self employed painter and
decorator, as a client. When preparing the
end of year accounts you realise that the
turnover has exceed the VAT limit. This
means that James should have registered
for VAT and charging VAT.
What should you do?
Independence
A member in practice who provides an
assurance service is required to be
independent of the assurance client
• In groups of 3/4 write a definition on the
following (in accounting in terms)
Independence
Independence of mind
Independence in appearance
5 mins
Gifts and hospitality
An accountant in practice may have a possible threat to
their objectivity by accepting gifts, services or hospitality
from a client.
This is because these gifts could influence the work
performed and decisions made by the accountant.
The issue here is whether all gifts should be refused or
whether it is acceptable to accept small gifts
Inducements
For an accountant in business there are similar issues
An inducement is something that is offered to
encourage or motivate a person to do something.
Inducements may take various forms, including gifts,
hospitality, preferential treatment or even friendship.
Inducements
Objectivity or confidentiality of an accountant can be
threatened when an inducement is made in an attempt
to:
– Influence actions or decisions
– Encourage the accountant to act dishonestly or illegally
– Obtain confidential information
It’s a gift????
• You work for Podesta & Co. Gino from the
local Italian restaurant (who are clients) turns
up with a case of champagne and a seasonal
greeting card. He suggests giving a bottle to
each member of staff. He adds that he has
arranged a table for the firm on Friday
compliments of the restaurant
• What do you do?
Accepting gifts | AAT Ethics
The Bribery Act
Bribery Act 2010 covers criminal law.
The person offering the inducement is guilty of the
offence of bribery.
Equally the person accepting the inducement can also
be prosecuted under the act.
The Bribery Act
The four key Bribery Act offences are:
•
•
•
•
Bribing another
Receiving a bribe
Bribing a foreign official
Failing to prevent a bribery
Conflict of interest
Two issues that give particular cause for concern: Pressure to act illegally - If you are asked to do
something that is against the law, false or
dishonest you must refuse.
 Pressure to act contrary to technical or
professional standards. Here we mean:
accounting standards
professional standards
ethical guidelines
Conflict of Interest – YouTube
Conflict between different clients
• You could have clients in the same market sector all
competing with each other, so the success with one
customer increasing their sales may be detrimental to
your other clients so………
• You could give advice to one client knowing that it will
adversely effect another/ you have information about one
client that would be useful to the other!!!
Example
Jim is an AAT member who runs Kirk & Co a
successful firm of accountants. He has recently been
approached by a local firm of builders to do
accounting work for them. One of his existing clients
is another local firm of rival builders.
What should Jim consider before taking on this new
client?
Conflict of Loyalties
Loyalty
‘being firm and not changing in your support for a
person or an organisation, or in your belief in your
principles’
Employed accountants are expectec to be loyal to their
employer, but they have a duty of loyalty to the
accounting profession.
Conflict of loyalties
May face pressure to :
break the law
breach rules and standards of the profession
be part of a plan for unethical or illegal earnings
lie or mislead auditors or regulators
Difference of Opinion
• There can be an honest difference of opinion
which may not be an ethical conflict.
• The viewpoint of both sides will be valid.
• And that the action nor the opinion is
unethical or unlawful
Action that you can take to resolve an
ethical conflict – employed accountant
• Obtaining advice from
employer/professional advisor or a
professional body
• Offer to resign or ‘whistleblow’ if necessary
• Consider resignation
Conflict resolution
Consider the following points :
• The relevant fact relating to the conflict
• Assess all the ethical issues involved
• The fundamental principles that are involved by ethical
conflict to the matter in question
• Whether there are established internal procedures to
deal with the conflict and if so how they can be applied to
situation
• What alternative courses of action are available to be
accountant
Example
You and the Financial Controller are
discussing the valuation of stock at the end
of year. He believes that the stock should
be valued using the AVCO however you
prefer the FIFO approach.
Is this an ethical conflict?
Example 1
You are covering your boss who is away for
two weeks on holiday and it has become
apparent to you that he has been making
unauthorised payments from the company’s
bank account to his personal one.
What do you do?
Keeping written records
If you are faced with an ethical dilemma you
should keep a written record
Including: All meetings and discussions
 Who attended
 What was discussed
 Decisions reached
 Action points
Can be used as proof in a Court of Law
Conflicts of Interest